T - 9 and counting; better than a flu shot; gold, China, and the future of the dollar; HSBC jumps on yuan bandwagon
"98% of all votes cast this year will be on paper" (but no ID required--or is illegal to ask for--in many states)
Rogan chickened out on Operation Warp Speed and the democidal mRNA “vaccines.” Bobby Kennedy will have to straighten Trump out at some point if they get in. The Rogan-Trump interview in full:
Here’s what to do about the fall flu:
On the epidemiology of influenza
800 International Units (IU) is low. I take 10,000 IU of Vitamin D daily and try to get a lot of sunshine. A strong inverse association between COVID-19 severity and Vitamin D blood levels has also been observed.
On the international currency war front, Singaporean Sean Foo reports on the potential for a drastic upward revaluation of gold if the BRICS get their way. Jim Rickards gushes about this possibility from time to time.
Meanwhile, David Woo in Israel says, “Rah rah rah, the Dollar is King!” As I have often pointed out, even the threat of war in Europe or Asia favors the dollar in the intermediate term. Woo’s thesis, supported by weak correlations with currency strength, is that innovation and population growth (including illegal immigration) produce strong currencies.
However, as Kevin Walsmley of “Inside China Business” points out, the situation regarding US STEM graduates is dire. Many are international students. Walmsley points out elsewhere that the effect of US sanctions on imports from China is that Chinese companies open factories in Vietnam or Mexico and export to the US from there. There is always a way around sanctions that results in a higher final price.
If China decides to play hardball and refuses to open factories in the US hiring American workers, as suggested below, that will increase the odds of a kinetic world war.
The Big Picture is that it will be very difficult for the US and China to avoid rapid inflation of their currencies, as both are heavily debt-laden and struggling to balance fiscal and monetary policies. Both could experience stagflation over the next several years. The US is likely to enter a recession officially in 2025. China has been skirting deflation recently and will almost certainly bring out the monetary-fiscal cannon soon. Whether we see a global bout of hyperinflation is an open question.
Trump’s campaign promise of putting a tariff on “everything” will destroy American industries. Without competition, they will become weaker and wither. Trump should invite Chinese EV companies to set up factories in the US and hire American workers, as VW, Toyota, and Honda have done.
For example, Toyota has a significant manufacturing presence in the United States. They operate ten factories across various states, including Kentucky, Indiana, Mississippi, Texas, Alabama, and more. These facilities produce a wide range of vehicles, including popular models like the Toyota Camry, Corolla, and RAV412.
The Toyota Motor Manufacturing, Kentucky, Inc. (TMMK) plant is the largest Toyota manufacturing facility in the world, capable of producing 550,000 vehicles annually1. Another notable plant is the Toyota Motor Manufacturing, Mississippi, Inc. (TMMMS), which primarily produces the Toyota Corolla1.
HSBC is jumping on the yuan/renminbi bandwagon.
I asked GPT-4o about these issues last night. The response was quite reasonable. Here is the conversation:
Given the US's large fiscal and trade deficits, and China's large trade surplus, and the fact that both countries are carrying very heavy debt loads, what should US economic policy be with respect to trade, sanctions, reindustrialization, etc., to avoid excessive protectionism causing US industries to lose international competitiveness?
This is a complex question that involves balancing numerous competing priorities in the context of a highly interdependent global economy. Given the current economic conditions—large US fiscal and trade deficits, significant Chinese trade surplus, and both countries facing heavy debt burdens—US economic policy must walk a fine line between pursuing reindustrialization and maintaining an open, competitive environment that avoids the pitfalls of excessive protectionism. Below, I'll provide a multi-faceted approach to navigating this delicate economic terrain.
1. Targeted Reindustrialization
The US should pursue targeted reindustrialization rather than blanket reindustrialization policies. This means focusing on critical sectors that have strategic importance, such as semiconductors, renewable energy, pharmaceuticals, and advanced manufacturing. The goal is to ensure that vital supply chains are less dependent on imports from China and other foreign sources, which is essential for national security.
Incentives for R&D: The government should invest in research and development (R&D) through grants and subsidies, particularly in key industries like green technologies and next-generation manufacturing. Collaboration between the public and private sectors can help foster innovation and global competitiveness without excessive protectionism.
Reshoring Essential Supply Chains: Instead of a full-scale reshoring initiative, which is economically infeasible and inefficient, the US should aim to diversify supply chains. This might involve a mix of reshoring some production, expanding partnerships with allied countries (friendshoring), and building redundancy for critical imports.
2. Selective and Strategic Tariffs and Sanctions
While protectionist measures like tariffs are sometimes necessary, they can lead to retaliatory actions and reduce competitiveness. The US should adopt selective tariffs and sanctions targeted at unfair practices without resorting to broad-based trade barriers. These could focus on:
Dumping and Subsidies: To address concerns of unfair competition, the US could impose tariffs on sectors where Chinese industries benefit from significant state subsidies, effectively dumping goods at artificially low prices. This action should be evidence-based and designed to address specific instances of unfair competition rather than targeting entire industries.
Strategic Counter-Sanctions: Instead of imposing wide-ranging sanctions on Chinese industries, the US could target specific companies or sectors tied to practices like intellectual property theft or those directly linked to human rights violations. Such a targeted approach minimizes disruption to global supply chains while putting pressure on specific malpractices.
3. Trade Diversification and Partnerships
The US should deepen economic ties with other countries to reduce dependence on China and promote resilient supply chains. By strengthening trade relationships with countries like India, Vietnam, Indonesia, and Mexico, the US can create a counterbalance to China and ensure more balanced trade flows.
Regional Trade Agreements: Reviving or renegotiating trade agreements, such as joining a version of the Trans-Pacific Partnership (TPP), could provide the US with leverage and create a unified front that balances China's influence in global trade. These partnerships are crucial for accessing diverse markets and maintaining the competitiveness of US industries.
Bilateral Agreements with Emerging Markets: By forming new trade agreements with emerging markets in Asia, Africa, and Latin America, the US can foster growth in markets that are likely to drive global consumption in the future. These agreements should aim to promote market access for US companies and open up investment opportunities.
4. Investment in Education and Workforce Training
To ensure that reindustrialization leads to competitive outcomes rather than creating inefficiencies, the US needs to invest heavily in education and workforce training. This means preparing the workforce for jobs in advanced manufacturing, clean energy, and tech sectors.
STEM Education: Strengthening STEM education at all levels is key to ensuring the availability of a skilled workforce that can support industries vital to maintaining competitiveness.
Retraining Programs: Retraining workers from declining industries, especially those impacted by offshoring, is essential. Programs like apprenticeships, vocational training, and community college partnerships can help transition workers into higher-value sectors.
5. Tax Policy and Encouraging Domestic Investment
A smart tax policy can incentivize companies to invest in domestic production without falling into overly protectionist territory. Examples include:
Tax Credits for Domestic Production: Offering tax credits or deductions to companies that invest in critical industries in the US, especially in R&D and manufacturing, can provide a boost to reindustrialization.
Incentivizing Capital Investment: Modifying capital gains tax rates for investments in key sectors or new manufacturing facilities can encourage private sector participation. This could ensure that investment flows into productive, high-growth industries.
6. Addressing Structural Fiscal Issues
The fiscal deficit is a major concern that impacts the credibility of US policy, borrowing costs, and ultimately competitiveness. To address this:
Spending Reforms: The US should prioritize spending on areas that enhance productivity—such as infrastructure, technology, and education—while limiting non-essential expenditures.
Tax Reforms: Reforming the tax code to ensure higher compliance and eliminate loopholes can help increase government revenue without stifling business activities.
Infrastructure Investment: Investing in infrastructure improvements, particularly those that enhance connectivity (transportation, broadband, ports) will help make US industries more efficient and better positioned to compete globally.
7. Coordinated Trade Policies with Allies
Instead of acting alone, the US should work with like-minded allies to establish rules on international trade that mitigate China’s anti-competitive practices. A multilateral approach to challenges such as intellectual property theft, state subsidies, and dumping will provide greater leverage and minimize retaliation.
WTO Reform: Partnering with allies to reform the World Trade Organization (WTO) and modernize its rules could be an effective way to ensure that China adheres to fair practices without having to rely heavily on unilateral tariffs or sanctions.
Joint Investment Initiatives: Joint investments with allies in critical technologies (e.g., AI, 5G, semiconductors) can reduce reliance on Chinese technology while also pooling resources and sharing expertise.
8. Digital Trade and Innovation Support
Fostering digital trade and protecting intellectual property rights will be crucial for maintaining competitiveness in technology-driven industries. The US should:
Promote Data Flow: Encourage the free flow of data across borders, which is vital for tech innovation and cross-border trade in digital services.
IP Protection: Strengthen mechanisms to protect intellectual property through international agreements, ensuring that US companies’ innovations are protected from misappropriation.
Conclusion: Balancing Openness and Self-Reliance
US economic policy should balance openness with strategic self-reliance. Excessive protectionism risks inefficiency, complacency, and retaliation, which could harm US industries in the long term. Instead, a mix of targeted reindustrialization, strategic tariffs, diversification of trade partners, tax incentives, and education investment will help the US boost domestic industry while staying competitive in the global market.
The emphasis should be on fostering innovation, reducing critical dependencies, and building a skilled workforce that can support advanced manufacturing and tech-driven industries. Coordination with allies, targeted sanctions, and prudent fiscal management will also help avoid excessive fiscal deficits while achieving a sustainable and competitive economic future.
Pray for peace! It makes a difference!